Exhibit
10.21


SMART
ONLINE, INC.





REVISED
BOARD COMPENSATION POLICY





(Effective
April 1, 2009)





1.           Introduction. Smart
Online, Inc. (the “Company”) will compensate non-management directors through
the payment of Board retainers based on election of the Board in consideration
of the services provided by such directors and in recognition of their
responsibilities to the company and potential liabilities associated therewith.
Management directors are not entitled to receive any directors’ compensation
outlined in this policy.





2.           Board Member Fees.
Each non-management member of the Board of Directors not serving as Chairman of
the Board shall be entitled to monetary and equity compensation in following
amounts:





A.           Monetary
Compensation.





(1)           Each
such director shall be paid a fee of $1,500 per month, due and payable by the
fifteenth (15th) day of
the same month in which services are rendered.





(2)           Additional
monetary compensation may be awarded at the Chairman of the Board’s discretion
for any director incurring overnight travel to attend Board meetings or other
functions for the benefit of the Company.





B.           Equity Compensation.
Each such director shall, at the sole discretion of the director, be awarded
pursuant to the Company’s 2004 Equity Compensation Plan either:





(1)           Upon
such director’s appointment or election to the Board, a non-statutory stock
option grant representing 40,000 shares of the Company’s common stock, having an
exercise price equal to the fair market value of the Company’s common stock on
the date of grant. In addition, at the time of the annual meeting of the
Company’s stockholders, each such non-management member of the Board who is
re-elected to the Board, and who has been serving on the Board for at least six
months prior to the date of the annual meeting, shall be granted an additional
non-statutory stock option grant representing 40,000 shares of the Company’s
common stock, having an exercise price equal to the fair market value of the
Company’s common stock on the date of grant. All options granted under this
Section 2.B.(1) shall vest either (a) quarterly over a year’s time, or (b) in
full on the one-year anniversary of the award but in either case, subject to the
requirement that the grantee is a member of the Board of Directors on the
applicable vesting date; or





(2)           Upon
such director’s appointment or election to the Board, an award of 20,000 shares
of restricted common stock of the Company, valued at the fair market value of
the Company’s common stock on the date of the award. In addition, at the time of
the annual meeting of the Company’s stockholders, each such non-management
member of the Board who is re-elected to the Board, and who has been serving on
the Board for at least six months prior to the date of the annual meeting, shall
be awarded an additional 20,000 shares of restricted common stock of the
Company, valued at the fair market value of the Company’s common stock on the
date of the award. The contractual restrictions on all restricted stock awards
granted under this Section 2.B.(2) shall lapse quarterly over a year’s time,
provided that the grantee is a member of the Board of Directors on the
applicable lapse date.





3.           Chairman of the Board
Fees. If a non-management member of the Board of Directors serves as
Chairman of the Board, he or she shall be entitled to monetary and equity
compensation in following amounts:





A.           Monetary
Compensation. Such Chairman of the Board shall be paid a fee of $1,500
per month, due and payable by the fifteenth (15th) day of
the same month in which services are rendered.





B.           Equity Compensation.
Such Chairman of the Board shall, at the sole discretion of the Chairman, be
awarded pursuant to the Company’s 2004 Equity Compensation Plan
either:









(1)           Upon
such director’s appointment or election to the post of Chairman of the Board, a
non-statutory stock option representing 60,000 shares of the Company’s common
stock, having an exercise price equal to the fair market value of the Company’s
common stock on the date of grant. In addition, at the time of the annual
meeting of the Company’s stockholders, each non-management Chairman of the Board
who is re-elected to the Chairman of the Board post, and who has been serving on
the Board as its Chairman for at least six months prior to the date of the
annual meeting, shall be granted an additional non-statutory stock option grant
representing 60,000 shares of the Company’s common stock, having an exercise
price equal to the fair market value of the Company’s common stock on the date
of grant. All options granted under this Section 3.B.(1) shall vest either (a)
quarterly over a year’s time, or (b) in full on the one-year anniversary of the
award but in either case, subject to the requirement that the grantee is a
member of the Board of Directors on the applicable vesting date; or





(2)           Upon
such director’s appointment or election to the post of Chairman of the Board, an
award of 30,000 shares of restricted common stock of the Company, valued at the
fair market value of the Company’s common stock on the date of the award. In
addition, at the time of the annual meeting of the Company’s stockholders, each
non-management Chairman of the Board who is re-elected to the Chairman of the
Board post, and who has been serving on the Board as its Chairman for at least
six months prior to the date of the annual meeting, shall be awarded an
additional 30,000 shares of restricted common stock of the Company, valued at
the fair market value of the Company’s common stock on the date of the award.
The contractual restrictions on all restricted stock awards granted under this
Section 3.B.(2) shall lapse quarterly over a year’s time, provided that the
grantee is a member of the Board of Directors on the applicable lapse
date.





4.           Reimbursement for
Expenses. Each non-management director is eligible for expense
reimbursement for reasonable travel and lodging expenses incurred in connection
with his or her attendance at Board and committee meetings, in accordance with
the same standards applicable to members of the Company’s executive management.
The Company will ensure all such reasonable expenses are processed and paid
expeditiously upon submission to the company with the required forms and
receipts.


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